The role of microfinance in the socio-economic development of women in a community : a case study of Mpigi Town Council in Uganda

Abstract:

The development of a community, especially a poor community, hinges on
interventions from development workers in government and non government
organisations. In the recent past, microfinance has been strongly recommended
as an intervention that could assist poor people to improve their quality of life by
providing small amounts of money to initiate development enterprises. The
microfinance services are provided through microfinance institutions.
This study was aimed at establishing the role of microfinance in the socioeconomic
development of women in a community. Mpigi Town Council in
Uganda was the study area. Fifty respondents were interviewed and eight of
these were employees of microfinance institutions and two worked as technical
staff from Mpigi District Local Government. Twelve microfinance institutions were
identified as providing services to the community in Mpigi Town Council.
A variety of literature on microfinance in the developed world, developing world,
Africa, Uganda and Mpigi Town Council was reviewed. It was noted that the year
2005 was identified as the International Year of Micro-credit during which its
significance would be highlighted. The aim of the international year of microcredit
was to improve on the knowledge, access and utilization of micro-credit by
poor people in the developing world. During the literature review, it was evident
that the literature on the impact of microfinance on the socio-economic
development of women in Mpigi Town Council was lacking. By filling this gap,
this research will be a referral document for other researchers and a resource
book for microfinance institutions during the implementation of their programmes.
The study was carried out using both quantitative and qualitative methods.
Questionnaires and interviews were used to collect the data that was presented
in tables, graphs and numbers to show the role played by microfinance in the
socio-economic development of women in a community.The findings of the study reveal that microfinance institutions operating in Mpigi
Town Council provide services like training and skills development, insured credit
facilities and savings mobilisation, banking facilities, supervision and monitoring
of the clients, provision of agriculture inputs like seeds and chemicals and
physical items like animals (cows, goats, pigs, sheep etc). The services are
particularly provided to women groups, salary earners, and individual women and
men. The repayment of the credit facilities is usually through weekly and monthly
instalments. The size of the loan depends on the MFI but ranges from one
hundred thousand to millions of shillings. The security usually required is group
collateral in case of groups, salary in case of salary earners and any other as
deemed necessary for the individual by the MFI.
The study established that women who accessed the loans from MFIs were able
to improve their socio-economic status through starting up and or expanding
investments and enterprises, paying school fees for their children, purchase of
household items like furniture, land and solar installation, building of houses,
confidence building, participation in leadership roles etc.
The research also found out that women face some challenges in their access
and utilization of the MFI services and these include; small amounts of money
disbursed, diversion of funds, high interest rates, low returns on investment, short
grace periods, unfavourable repayment schedules and risk of property
confiscation by the MFI.
The respondents recommended that the government should intervene, especially
where interest rate is concerned and centralize it or make it uniform and also
monitor the operations of the MFIs so that they offer adequate services to the
women. As far as the MFIs are concerned, the respondents recommended that
they should lower the interest rate, empathize with their clients, monitor and
supervise more vigorously, collaborate with fellow MFIs, increase grace period
and enlist the support of employers in the area. For the microfinance
beneficiaries, the beneficiaries recommended that they should not divert the funds but should use them for the purpose intended. Furthermore, they should
not move from one MFI to another. They ought to acquire the loan when they
have some investment already, study the MFI before acquiring the services and
support each other as a group to ensure that there is progress in the various
undertakings.
The results of the research have led to the assertion and affirmation that
although the benefits may vary from one beneficiary to another and from one
community to another, microfinance has in various ways played a significant role
in the socio-economic development of women in Mpigi Town Council. This
research report will be used as a document for other researchers and a resource
book for the microfinance institutions in Mpigi Town Council.